1. Field
This invention relates to mutual funds and methods for allocating assets in mutual funds.
2. Description of Related Art
Mutual funds provide advantages for investors including professional management and diversification of investments. Each investment in a mutual fund typically buys a share of a diversified portfolio of assets. The portfolio may be managed by investment professionals, relieving the individual investor of the need to make individual stock or bond selections.
Conventional asset allocation mutual funds tend to use conventional asset allocation strategies in which fund assets are allocated among three asset classes, stocks, bonds and cash equivalents, at one time. For example, a mutual fund may include 60% of fund assets invested in stocks, 30% of fund assets invested in bonds and 10% of fund assets invested in cash equivalents. These asset allocation percentages may be modified somewhat over time as market conditions change, but some allocation to all three asset classes is maintained. Therefore, substantially less than 100% of total fund assets are invested in any one asset class at one time.
Although conventional asset allocation strategies help to minimize risk by diversifying investments, these strategies are still susceptible to wide fluctuations in returns. Despite diversification, investors in conventional mutual funds risk incurring losses and negative returns, particularly in bear markets. Additionally, many conventional mutual funds using conventional asset allocation strategies fail to outperform major benchmark indices, such as the S&P 500 Stock Index, over long periods of time.
Accordingly, there is a need for an improved asset allocation mutual fund and a method for allocating assets in mutual funds that provide a positive rate of return every calendar year. Additionally, there is a need for an asset allocation mutual fund and a method for managing assets in mutual funds that provide greater long-term returns than the S&P 500 Stock Index, but with less risk.